NASHVILLE, Tennessee—Wall Street is looking at a hotel industry that isn’t feeling as optimistic about its own fate after a soft second quarter and amid what’s expected to be a weak third quarter.

Speaking during the “RevPAR from a Wall Street perspective” presentation at the Hotel Data Conference earlier this month, Vince Ciepiel, senior luxury and travel analyst and partner at Cleveland Research Company, said even though the first quarter was stronger than expected, the recent weakness is weighing on hopes going forward.

He said 40% of respondents in his company’s survey of revenue managers missed their budgets for Q2 and about 70% missed them in June. He noted this has had an obvious effect on how people are feeling about near-future performance.

“Very few are expecting any kind of pickup,” he said

Here are some takeaways from Ciepiel’s presentation.

1. Weakness expected in Q3Ciepiel said his company’s revenue-manager survey shows expectations for the third quarter are getting worse compared to just a few months ago.

He said there are a number of reasons why Q3 will be difficult.

“This is a byproduct of July being off to a weak start with how the (Fourth of July) fell and also lapping some political conventions,” he said. “And on top of that, September has been pacing weak all year but has not shown any improvement. If anything, it’s probably a touch worse.”

He noted that leaves the strength of the third quarter “almost entirely dependent” on performance in August.

“The question is ‘How good could August be?’” Ciepiel said.

2. Full-year expectations dipping lowerMost of the surveyed revenue managers indicated they expect to hit their budgets for the full year, Ciepiel said, but his company has tracked a significant drop-off in expectations compared to as recently as April.

“There was a lot of optimism following a strong (first quarter), then April didn’t decel as much as people thought, so it was ‘Hey, maybe we’ll be in the upper half or maybe even towards the high end of our full range,’” Ciepiel said. “Then you had a May and June and July that all kind of disappointed, and now people are more back to the midpoint or maybe even a little south of that.”

He pointed to continued weakness in corporate spending as a reason to remain somewhat doubtful about strong growth going forward, and said he doesn’t see anything that would indicate a shift in that pattern.

“2017 RevPAR expectations were never that robust,” he said. “It was always very modest—something close to 1% or 2% type of growth.”

3. International growth fueling overall performanceCiepiel pointed out that brands seem to be faring at least marginally better than real estate investment trusts in the hotel space. One primary reason for this, he said, is that U.S. domestic performance seems to be lagging behind international performance. Brands typically have more business outside of the U.S. than REITs.

“International businesses are really taking off, and it couldn’t come at a better time, when domestic is decelerating,” he said.

4. Group a drag on public companiesThe performance of group bookings seems to be a sore spot for many in the public sector and is a common topic of conversation during quarterly earnings calls with investors.

Ciepiel said group weakness is tied to the overall weakness in corporate spending.

“Most recently, group was negative for everybody in the second quarter,” he said. “And the full-year pace numbers for every hotel company also moderated on group.”

5. Industry still relatively stableWhile a lot of this talk might seem dire, Ciepiel said, it isn’t truly that bad. Compared to other industries and sectors, hotels continue to enjoy relative stability, he said.

“This is a lot of noise for something that isn’t that volatile,” he said. “RevPAR’s probably going to be about 1.5% on average this year. If it’s down 50 (basis points) from the hopes six months ago, it’s only 50 bps. Things are still growing. Things are OK, on average.”

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